Bad weather in East drives down housing starts 5.9%

Housing starts fell 5.9 percent in February from the month before to 575,000 units after bad weather in the Northeast and South kept builders off the job site.

Nigel Gault's, chief U.S. economist at IHS Global Insight, said new homes continue to face tough competition from the glut of distressed properties. (See yesterday's item about home builder confidence.) But Gault said he does expect gradual improvement in housing starts in 2010.

Builders had been hoping for a sales bump from the federal home buyer tax credit that expires April 30. But there hasn’t been much sign of a boost in demand. (Again, see yesterday’s item on builder confidence.)

The new home inventory in a lot of places is down to fairly low levels. But the builders continue to struggle to meet the pricing floors set by REOs and short sales. Gault says starts will stablize as employment improves in 2010.

HousingWire has more on the impact of foreclosures on the new home market:

Paul Dales, a US economist at macroeconomic research consultancy Capital Economics,
said most of the 5.9% fall in US housing starts can be attributed to
the severe winter weather that prevented homebuilders from breaking new
ground last month. He warned the outlook for home building remains
bleak.

“[H]omebuilding activity remains very low by historical standards
and is set to remain that way for some time,” Dales said. “The problem
is that the market is saturated with excess supply.”

He added: “There are currently 3.8m homes for sale (8.4 months of
supply at current rates of sale). Moreover, we estimate that another 5m
to 6m homes may yet be foreclosed. In total, that would be 21 months of
supply.”

BusinessWeek also reports:

Mounting foreclosures are making it harder to clear inventories,
keeping pressure on prices and discouraging new construction. The
economy has yet to create the sustained job growth that could
invigorate housing demand and is one reason Federal Reserve policy
makers will probably keep interest rates near zero after their meeting
today.